Housing Affordability: Worse for Renters, Better for Buyers

THOUGH AFFORDABLE HOUSING may carry a bad image, some of the newer affordable…

November 13, 2012

Falling house prices and crazy-low interest rates have put home-buying in reach of more people, but renters continue to suffer as the supply of apartments shrinks and median wages fall, a report Tuesday shows.

The so-called housing wage, the hourly pay a household would have to make in order to afford a typical 2-bedroom apartment, rose to $23.58 in Connecticut in 2011, from $23.37 a year earlier, the Hartford-based Partnership for Strong Communities said.

That's about $49,000 a year in income, and it assumes the apartment is $1,225 a month, since housing is considered affordable if it costs less than 30 percent of a household's income.

That increase in the housing wage is less than in several recent years; the figure was $13.94, or $29,000, in 2004.

And the state – last in the nation in housing construction in 2011 and over the last decade — is short of the number of low-cost or subsidized apartments that are available, by 82,000, the report said.

In 2011, 52 percent of the state's 436,538 households that rented in 2011 paid more than 30 percent of their income for their apartments or houses, up slightly from 51 percent a year earlier. Among all renters, 26 percent, or 114,891, made less than 50 percent of the state's median income and paid more than 50 percent of their income in rent.

The percent of people who rent in Connecticut has risen over the last few years as some are unable to qualify for home mortgages and some have chosen to rent because house prices are falling.

Those falling prices, combined with historically low mortgage interest rates, have led to a decline in the number of towns in which a household at the statewide median in pay cannot qualify for a mortgage at the local median price. In 2011, there were 88 such towns, down from 112 in 201o.

The most affordable towns by that measure were, in order, Waterbury, Bridgeport, New Britain, Norwich and Windham — indicating a shortage of houses in Hartford and New Haven. The least affordable were Greenwich, New Canaan, Darien, Westport and Wilton, according to the Partnership's companion study on towns.

The Partnership aims to end homelessness and broaden housing options for moderate- and low-income families. Whenever we talk about making more housing available to more people, there's a moral argument and an economic one. David Fink, policy director at the Partnership, said measures to support housing through public suppor and incentives make cities and towns stronger economically.

For example, the state's lack of moderately priced new houses and apartments is viewed by many as a sign of low demand because of a weak economy and no population growth. But, Fink said, "We've deterred out population growth by not having places for them to live."

Why should upscale towns allow lower-priced housing? It's a more attractive place for everyone if teachers, cops and firefighters are local, Fink said. "A lot of towns are starting to do it," he said.

That's a bit of a stretch in places such as Darien and New Canaan. The Partnership's annual affordability report has been grim in recent years but comes with some notes of hope this year. Gov. Dannel P. Malloy has allocated $300 million for low- and moderate-cost housing and $200 million for subsidies and other supportive programs.

And, the reports note, there has been a significant uptick in the number of construction permits for multi-family housing in Connecticut.

The danger in this state is that rising interest rates and inflation, which are dictated by national trends, will happen before the state's economy recovers, leaving Connecticut in a further squeeze.

As it is, the report said, 55 percent of real estate agents reported rising rents in August of this year, compared with 39 percent at the end of 2010.